NAOS CEO Insights

CEO INSIGHTS – Week Ending 13 May 2022 By NAOS Asset Management

May 27, 2022

CEO Insights - “...They are cognisant this is a very low-rate environment and can’t continue”

CEO INSIGHTS – Week Ending 13 May 2022 By NAOS Asset Management

“By and large, businesses aren’t particularly sensitive to rates. They are cognisant this is a very low-rate environment and can’t continue” Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.  
 
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Cryptocurrency Decline
“We've been through enough of these [downturns] where I think in the up markets, people are irrationally exuberant and then in down markets people are irrationally pessimistic…I think there'll be real blood running in the streets or something like that if it continues for four quarters” Brian Armstrong, CEO, Coinbase Global Inc [world’s largest cryptocurrency exchange]
 

“I wouldn’t characterise it at this scale as a real threat to financial stability, but they’re growing very rapidly and they present the same kind of risks that we have known for centuries in connection with bank runs” Janet Yellen, U.S. Treasury Secretary

Construction & Industrials

Activity in the apartment and non-residential markets have improved after an extended slowdown in the last few years” Julie Coates, CEO, CSR Ltd

“I talk to our customers, the 2 things that they're most concerned about is, firstly, availability of stock…and the second thing is around trade labour shortages and the impact that's having on cost” Julie Coates, CEO, CSR Ltd

Commodities & Resources

“We recognise that at the moment there’s short-term supply-demand conversations [strong demand in the lithium market]. How that plays out over the next 20 or 30 years, I don’t think it will last” Ragnar Udd, President Minerals America, BHP Group Ltd

“We expect steady commodity growth, particularly in gold, copper and quarry and construction in the second half which will continue to drive demand for our products and services” Sanjeev Gandhi, CEO, Orica Ltd

Mortgages & Households

“Given this expected economic environment, delinquencies are predicted to gradually increase, and claims incurred are likely to return to more normal levels” Pauline Blight-Johnston, CEO, Genworth Mortgage Insurance Australia Ltd

“In the last two years, the change in consumer habits, with a prevalence of “stay at home”, and the consolidation of some trends already in place in the market, have favoured the expansion of the small domestic appliance business globally” Massimo Garavaglia, CEO, De'Longhi Group SpA

Interest Rates

“The level of concern is growing almost week by week. The vast majority of businesses and the vast majority of consumers haven’t had to deal with an environment like the one that we are in for 30 years” Joseph Healy, CEO, Judo Bank Ltd

“On the back of the first cash rate increase it’s important to remind everyone it’s a normalisation of the cash rate from really what was an emergency setting when the cash rate went to 10 basis points in November 2020. At the time it was very uncertain what that recovery would look like. And now we’re anticipating an employment rate which is dramatically higher” Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

Business Sector

“Small businesses are increasingly seeking services beyond cloud accounting” Steve Vamos, CEO, Xero Ltd

“By and large, businesses aren’t particularly sensitive to rates. They are cognisant this is a very low-rate environment and can’t continue” Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

Financial Markets

“Channelling Jerry Maguire, we need to show them [investors] the money. We have made a ton of progress in terms of profitability, setting a target for $5 billion in Adjusted EBITDA in 2024, but the goalposts have changed. Now it’s [the market’s view on tech companies] about free cash flow” Dara Khosrowshahi, CEO, Uber Technologies Inc

Labour Markets & Workplace

“Rising wages is something everybody is dealing with” Christine McCarthy, CFO, The Walt Disney Company

“Working at the office now is now a relic of the past” Brian Chesky, CEO, Airbnb Inc

“My prediction is three days a week becomes two days a week, and two days a week becomes one day a week, and pretty soon are you really in a hybrid world, or are you mostly a remote world? People don’t realise this two, three days a week thing is not super sustainable. People are going to realise, ‘OK, let’s be more intentional about when people gather. And let’s gather for a week or two at a time” Brian Chesky, CEO, Airbnb Inc

Supply Chain

“Our supply chain problems aren't here forever” Brian West, CFO, The Boeing Company

Technology

“If you want to do augmented reality, you need the reality first in order to create the augmented reality on it…We are perfect to be the base layer of the Metaverse” Rob Newman, CEO, Nearmap Ltd

Environmental

The decarbonisation of the steel industry is a very big lever to quickly achieve significant progress towards climate neutrality” Martina Merz, CEO, Thyssenkrupp AG

Healthcare & Science

“All 4 end markets [pharma & biotech, academic & governments, industrial use, healthcare] are strong, and you're seeing that across the industry. I don't think you're seeing any sort of pent-up demand, disrupted demand that people are catching up with. It looks like very fundamental; customers are buying what they're using is what it appears to us” Marc Casper, CEO, Thermo Fisher Scientific Inc [world’s largest laboratory equipment supplier]

Supermarkets

“What's happening in the [plant-based protein] sector is you see all these new entrants coming in, and many of them are using price as a way to try to capture early market share. While the animal protein industry has been able to substantially increase pricing to essentially offset significant reductions in volume, in our sector, we have not had the opportunity to do that” Ethan Brown, CEO, Beyond Meat Inc

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Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.